Dollar plunges again!

Gold shot up $17/ounce due to the weakening of the dollar, but lost a total of $1.80 from predominant selling (a net total of +$15)

And silver shot up by about 10% of it's "value" (really the dollar just go weaker compared to silver).

I would recommend waiting a few days (there will surely be a mild rebound) and then de-vesting oneself of the dollar. The value of those green sheets of paper will continue to fall drastically over the next decade.

For the average person GLD seems to be a good play on the price of gold. This is a nice play for the average person on an ETF. I tend to think that gold may be a risky play and could be quite volatile in the near term so even with the near term pressure I am out of it. This is a less risky play than the commodities market for the average investor. If one is option savy they can also make money on spread plays that take advantage of volatilty.

FCX is a better play on gold. Even though it is probably more of a play on copper. It has been on a slight consolidation phase and will certainly creat another pole if metals remain high. This is a play on both gold, copper, and a good company.

The gold standard was left behind years ago and thus its method of valuation to trade with it in mind. We are currently on a debt standard that the Fed has been managing for almost 100 years. Whether or not the dollar goes up or down by a couple of percentage points is an argument the money traders have to deal with while precariously balanced on the edge of the market crashing abys

Well if you don't already own it you'd be crazy to buy it now while it's so high. Don't believe the salesmen, they want you to buy it now because they make more commission. Buying something when it's been rising steadily for several years is not wise, no matter what those who will profit from the sale tell you.

That'd be like buying a house back in 2008 - oops, lots of people did that didn't they...

Are you kidding? Now is a terrible time to buy gold or silver. Buy low, sell high, right? The best thing to do would be to go back in time to the weeks after the Y2K disaster didn't happen, buy them then (they were relatively cheap) and come back forward in time to now, sell them off to get something you can actually exchange for goods and services in the modern world (that's money, folks) and buy stuff.

Say you sell up to 1000oz of gold at 1600$ for a total face value of $1,600,000 USA. You then charge 3% commision on the exchange. $1,600,000 X 1.003 = $1,604,800 USA. The $4800 USD earned in commision allows you to buy back 3 more ounces of gold. So at the end of the day, you now have 1003oz of gold instead of 1000oz just by trading. Rinse and repeat this process, and you get get even more gold. They trade gold not to get dollars, but to get more gold.

This is termed pyramiding. On paper using the leverage that you have in the comodities market can allow a person to seemingly make a lot of money in the market. Heck the commodities market offers much better than 10 to 1 leverage so you can make a heck of lot right?

Don't bet on it. I will show you why.

Lets first look how the ideal position looks on paper. We will use your 1000 oz at $1600/oz example. Like you said you control $1,600,000. At a 10 to 1 leverage, you are only required to put up $160,000. So lets see what happens if it goes up 1% every day for 10 days.

Day 1 at the end of the day:1.6M +16,000 close and rebuy in the morning. You have no $176,000 to play with and you are able to buy 1.616 M worth of gold. At the end of 10 days you have 1.767M dollars worth of gold You subtract 1.6m and you have 167,000 profit. Holy smokes you more than doubled your money. I over simplified this but this is how it appears until you actually participate in the market.

The first thing that happens is sit at your computer and you see the gold price is going up and you plop down your $160,000 and boom right then the market drops 2% and you just lost $32,000 when the market makers were trying to shake you out in the morning. Well you are smart and you decide that you will cut your losses there. You liquidate your position and voila it goes back up to where it was previously and to boot it goes up another 1%. This &*"# gold is making me mad.

You go and in the morning your going to be smart and buy of the bottom. You even talk to your friend who know how to do pivots. You are going to buy when the market drops 1% and you can pick it off the bottom. It drops 1% so it hits your buy and when you buy it drops 1% but you hang on and it drops another 1%. &*#U...you cuss again It is down 3% for the day but on the next morning they walk it up another 4% so it opens another 1% higher for the day and you throw your computer out the window. After everything is said and done, it is so easy to lose your whole position.

Pyramiding looks amazing but it is very hard to make money because the markets don't perform ideally. Also at the same time it has a greedy human at the helm trying to make money which causes mistakes.

There are also the option momos. Buying way out of the money options before a company announces with expectation of 200 to 1 leverage, most always ends up with a losing every nickle invested.

Pyramiding today with analytics and many savy players is not a good idea. You know I dont think it was ever a good idea.

And people are buying it because of fear, not because of rational thought. The time to buy precious metals isn't now, when the price is high. It was about ten years ago, when the price was low. Now is the time to sell gold, not buy it.

Doug: good point about the "why would anyone accept a dollar for gold".

1) it's currently illegal to use gold to buy things at it's REAL value (the US does recognize gold as a currency, but only as $50 per ounce, which is clearly ludicrous. This is the application of Greshem's law)

2) Because people still accept the dollar. I'm pretty sure that most people in the US aren't thinking about the collapse of the dollar, they're merely thinking "I hope I have money for tomorrow's dinner". Thus, people who sell gold can still use the dollar to buy what they want.

Exactly. A dollar will buy you a burger at McDonalds. An ounce of gold will buy you maybe 1200 dollars at the gold exchange place. But you can't give the guy at McDonalds 1/1200 oz of gold and get a burger.

Buy an ounce of gold and you've got a lump of pretty metal that you can't use for anything practical. You can't eat it, you can't make tools out of it, you can't make phone calls on it, you can't ride it from place to place, &c. You can make pretty jewelry out of it, I suppose, or if you have the skills and the equipment, you can use it to make electronics components. but not many of us can do that.

All you can realistically do with gold is hope somebody is willing to give you more dollars for it than you paid for it.

"But you can't give the guy at McDonalds 1/1200 oz of gold and get a burger. "

This is misleading. Indeed - you can't give him a 1/1200 oz of gold BECAUSE IT'S ILLEGAL TO DO SO.

I could easily make a 1/1200 oz coin of gold (or, better yet, a 1/39th ounce of silver), but IT WOULD BE ILLEGAL TO USE IT AS MONEY AT THE MARKET RATE!!

And all the other "anti-gold" rhetoric you said in your last post applies equally well to the dollar. The only difference between gold/silver and the Dollar is that one is illegal to use at market value, and the other is not.

"All you can realistically do with gold is hope somebody is willing to give you more dollars for it than you paid for it."

Illegal, true, but also impractical. I mean, people can do illegal stuff if they want to. Some people make and sell all kinds of illegal stuff, but even they probably won't take gold in exchange for their cocaine or marijuana or crystal meth or whatever. Why not? 'Cos you can't easily exchange gold or silver for goods and services, not even other illegal ones.

The difference between precious metals and the dollar is that one can be readily exchanged for goods and services and the other cannot. When society collapses, perhaps gold and silver will become accepted media of exchange again, but my money's (heh) on something that also has other value, like whiskey or ammunition or something like that.

Indeed, you're listing the reason why paper money came into existence. It was once tied to real money, gold and silver.

Banks were allowed to issue receipts to claims of gold, and people just started using those. When banks illegally began inflating these receipts, bank runs took place to keep things in check.

Politicians found this ability to inflate the money supply as a valuable tool to provide for welfare and warfare expenditures, and so they basically made it illegal to perform a bank run by making the dollar untied to gold and silver.

So, the free-market found a way out of the "requiring everyone to lug around a gold coin" problem, but government then made it legal to steal wealth.

Evan this is a bit off the subject but I have been trying to get you to look at the chart located in this thread: http://hubpages.com/forum/topic/79128 It offers proof that the CRA pulled out of lending in early 2003 as Basel 2 plans for private MBS were implemented. This proves that the shadow unregulated banks rather than the regulated CRA drove the housing bubble to dangerous places. Without the private mbs the small housing bubble would have fizzled and been contained.

Related Discussions

What did the US use for collateral when we borrowed money from other countries?We know that the US government has borrowed billions of dollars from China, Japan and other countries. But what did we use for collateral? I've been told that the United States is actually a...

I stole this from another thread, so the topic could be discussed without further hijacking the thread it was on. I hope that was OK.John, I am not putting forth criticisms for you to defend. I do not know enough about MMT to hold an intelligent conversation about it. I was merely pointing to...

Will paper money be replaced and the current banking system changed?Write a hub on the how the banking system in the Western hemisphere might change and how that will effect today's paper money system.

What if we reinstated the gold standard to evaluate the dollar in its' current distribution. Since the debt standard has been blown apart in recent years could a real precious metal you can touch make a comeback?

Nixon implied; take our paper dollars or don’t, since 1971. The U.S. citizens have been able to utilize Federal Reserve Notes, not backed with any gold or silver as it's abandon metals. No wonder why the Greedy Bastards create war and steals oil from the Middle East.So what else does a dollar or...

http://www.investorsdailyedge.com/are-u … iling.htmlLooks like foreign investors are finally starting to see the light and refusing to buy anymore debt. I wonder how the government plans to fund it's grandiose plans now? Taxes on those making over $200,000 will only fund so...

This website uses cookies

As a user in the EEA, your approval is needed on a few things. To provide a better website experience, hubpages.com uses cookies (and other similar technologies) and may collect, process, and share personal data. Please choose which areas of our service you consent to our doing so.

This is used to display charts and graphs on articles and the author center. (Privacy Policy)

Google AdSense Host API

This service allows you to sign up for or associate a Google AdSense account with HubPages, so that you can earn money from ads on your articles. No data is shared unless you engage with this feature. (Privacy Policy)

This is used for a registered author who enrolls in the HubPages Earnings program and requests to be paid via PayPal. No data is shared with Paypal unless you engage with this feature. (Privacy Policy)

Facebook Login

You can use this to streamline signing up for, or signing in to your Hubpages account. No data is shared with Facebook unless you engage with this feature. (Privacy Policy)

Maven

This supports the Maven widget and search functionality. (Privacy Policy)

We may use remarketing pixels from advertising networks such as Google AdWords, Bing Ads, and Facebook in order to advertise the HubPages Service to people that have visited our sites.

Conversion Tracking Pixels

We may use conversion tracking pixels from advertising networks such as Google AdWords, Bing Ads, and Facebook in order to identify when an advertisement has successfully resulted in the desired action, such as signing up for the HubPages Service or publishing an article on the HubPages Service.

Statistics

Author Google Analytics

This is used to provide traffic data and reports to the authors of articles on the HubPages Service. (Privacy Policy)

Comscore

ComScore is a media measurement and analytics company providing marketing data and analytics to enterprises, media and advertising agencies, and publishers. Non-consent will result in ComScore only processing obfuscated personal data. (Privacy Policy)

Amazon Tracking Pixel

Some articles display amazon products as part of the Amazon Affiliate program, this pixel provides traffic statistics for those products (Privacy Policy)